Shale gas could transform U.S. Economy

Despite all the excitement about the Smart Grid and renewable energy transforming the U.S. economy, the Obama Administration and Congress have made little progress. Health care has overshadowed energy concerns and the States have effectively blocked any new interstate power projects. Lucky for us, the natural gas industry has discovered and begun to extract enormous volumes of natural gas from shale formations located in five States. One energy executive predicted that we could fuel every car and light and heat every home in the country for more than 120 years.

There's a problem though. The natural gas industry will have to take concrete steps to address and control environmental problems caused by hydrofracking before shale gas drilling becomes the poster child of the NIMBY movement.

The large volumes shale gas are no pipe dream or fancy government projections for the future. They are based on drilling projects which rely on good science and economic ways to extracting it. In fact, shale gas has already begun to enter the U.S. natural gas pipeline system and home owners are already reaping the benefits. What this means is that America has gotten a reprieve to work out regulatory and technological issues associated with the Smart Grid, solar energy efficiency and also to say "No to Foreign Oil". Here are some reasons why:

Natural gas is the fuel of choice for electricity generators, who use combustion turbines and combined cycle generators. Recently natural gas has overtaken coal.

It is much easier to build natural gas pipelines then power line projects.

Natural gas can be stored underground for later use.

The Natural Gas Industry has its act together- it has begun to use advanced drilling technology and closed loop systems to limit damage to the environment.

Analysts estimate that new discoveries of natural gas in the U.S. from shale formations will account for 66 percent production by the year 2020.

There are shale gas deposits in Texas, Arkansas, Oklahoma, and Louisiana. Some like the Haynesville are famous because they have brought prosperity to communities and have also pitted neighbor against neighbor. The Marcellus Formation has gained a great deal of attention. That's because most of it is found in Pennsylvania close to high energy demand markets in New York and New England.

Why this is plausible?The Natural Gas Industry has been very progressive in using technology to find natural gas and extract it. Natural gas producers have especially been persistent in finding cost-effective ways to extract the gas. That's because the price of natural gas at the well head is not regulated, but subject to supply and demand. The market price will determine the number of wells that are active.

Normally, natural gas wells are drilled vertically in the ocean and on land. The gas then flows out of the pipe and to the surface where it is processed to remove water, impurities, etc. However, horizontal drilling is very effective in extracting gas from shale deposits which lies 5,000 to 6,000 feet beneath the surface. Drilling technology now allows the companies to drill vertically and then to turn the drill in a horizontal direction. This increases the amount of gas that will flow into the well and to the surface. Water under pressure is used to fracture the shale. More on this later.

How does the gas get to market?Unlike electricity which has a relatively old transmission system, the natural gas pipeline system is robust. The pipeline system is like a 220,000 mile long interstate highway for natural gas. It moves moves huge amounts of natural gas thousands of miles from producing regions to local natural gas utilities, electric power generators and large manufacturers that use the natural gas to manufacture products.

While many people oppose building building power lines, ikt is not the same for natural gas pipelines. In fact most pipelines do get built. That's because changing the route of pipeline or burying parts of it can reduce public opposition and reduce environmental concerns.

Business as Usual or an OpportunityGovernor Edward Rendell of Pennsylvania, where much of the Marcellus Shale is located, expects drilling permits to triple in 2010. Some expect Pennsylvania to become a net exporter of natural gas by 2013. That's certainly good news for consumers in the New York and New England areas. Unfortunately, it does little to get the U.S. off it's dependence on foreign oil. To do that we have to do the following:

Rethink electric vehicles and plug-in vehicles that rely on wind and solar energy.

Develop a plan for federal and state government fleet vehicles to rely more on natural gas vehicles.

Don't fall into the trap and think that natural gas is the answer. Work must continue on the Smart Grid, demand side management and increasing the efficiency of solar panels.

I know that natural gas does not not solve the green house gas emission problem. But it does reduce carbon dioxide and provides us the window to work on carbon reduction and more important abandon foreign oil. Some people think natural gas vehicles are a bad idea. I totally disagree. Remember that solar power and wind energy projects will be limited by the lack of high voltage power lines to get the power to where it is needed.

What else can we do? If we continue the debate, that would mean continuing to consume 322 million barrels of foreign oil at a total cost of $24.6 billion according to the Pickens Plan. That's 60 percent of our needs to just keep on driving the way we do. What could we do with just a portion of that $25 billion? Maybe finance a "Manhattan Style Solar Project" to find less expensive material than silicon to use in solar cells and to increase the efficiency of conversion. The taxes alone could underwrite a portion of health care costs.

Social and Environment ConcernsThere is no denying that there is concern over developing shale gas and that communities will undergo a great deal of change both socially and environmentally. One film called Haynesville discusses the lives of three people in Louisiana who have property above the gas rich Haynesville Formation.

Fracking, hydrofracking and frack waterNatural gas producers drill wells horizontally and use water to fracture the shale so that natural gas will flow to the surface. This takes place 5,000 to 10,000 feet below the surface.

More specifically, “hydrofracturing” or “fracking” involves injecting mixtures of water and sand downhole, in order to fracture the tight, fine-grained reservoir rocks. After that, one has to recover the spent water before productive gas flow can be established. As the number of shale gas wells has increased in various States,questions have developed about sources and volumes of “frack” water and methods for its disposal. Both producers and regulators have found themselves confronting unexpected challenges regarding the environmental sustainability and economic hurdles for the shale gas production.

The natural gas industry will have to take concrete steps to address and control environmental problems before shale gas becomes the poster child of the NIMBY movement.